With 200 roadside restaurants and 11 million people passing through its doors each year, Little Chef has an enviable national franchise and a brand that is as quintessentially British as the all-day breakfasts that have been the mainstay of its menu since the first one opened in Reading in 1958.

But years have passed since the chain, with its smiley Fat Charlie logo, was seen as a motorists' treat, offering a break from monotonous journeys on crowded A roads. These days, the chain is associated (perhaps unfairly) with greasy food, threadbare carpets and poor service.

'It has lost its way and doesn't really know what it stands for,' says Jonathan Doughty, managing director of food service consultancy Coverpoint.

'Life has moved on since its heyday in the Seventies: sandwiches and real coffee are available on petrol station forecourts, fast food at McDonald's or Burger King, while M&S caters for the quality end. Where does Little Chef fit in?'

The answer is by no means clear, although Little Chef's difficulties have been exacerbated by the high number of different owners it has had since the mid-Nineties, several of which 'starved the business of investment', according to Doughty.

Under Wosskow and Heath, Little Chef's fortunes reached rock bottom. It slid into administration in early 2007, before being acquired by private equity turnaround specialist R Capital for £9m. It had been worth five times that amount two years earlier.

Ian Pegler, a former executive at M&S and Dixons, was appointed chief executive in March, which was quite a coup for the chain as he had been in charge of Welcome Break and Little Chef when they were owned by Forte from 1990-1994.

Industry sources say Pegler did a creditable job when he worked for Forte and that Little Chef was lucky to get him a second time.

When we meet in the dining room at London's Institute of Directors, Pegler orders a salmon starter, calves' liver to follow and rhubarb tart for dessert. 'Not standard fayre at Little Chef,' he says, smiling broadly.

He is determined to resuscitate the brand, which he says looks as if it has 'been in a time warp' since he left 14 years ago. Within weeks of his arrival, out went dishes that weren't selling such as (surprisingly, maybe) bangers and mash, rump steak and caesar salad.

In came fish pie, pasta salads, 'more interesting' puddings such as lemon and chocolate mousse, and breakfasts that include granary bread, juices and muesli. 'We wanted the menu to have a lighter touch and to embrace healthy eating habits that have grown, but to which Little Chef has paid too little attention,' he says.

'When I got here, it was hard to distinguish starters from main courses, and the menu was rather one-dimensional.' Pegler has introduced more variety: Thai prawn curry is one example; liver and bacon is to make a comeback this winter 'because that's what customers tell me they want'.

The Little Chef business is a complex one which has foundered only partly because it has been undercapitalised, Pegler says: 'Staff are recruited from the nearby villages and small towns where Little Chefs are located, predominantly on Britain's A roads. You can't hang people out to dry if they make a mistake. Morale is very important. Managing Little Chef is like running a collection of cottage industries.'

'Food has to be at the heart of what we do,' says Pegler. But also important is trying to guess when people are going to come to the restaurants, which tend to be either 'massively busy' or nearly empty: custom can be affected by roadworks, the weather and the time of the year. 'Sometimes, I feel that we have to reinvent the wheel because, like it or not, gammon and pineapple and a fry-up are still what a lot of people like to eat.'

Pegler recognises that obesity and heart disease are a problem in Britain and says 'frequent intake of high-cholesterol meals is neither sensible nor desirable. Occasionally, however, it doesn't have to be incompatible with healthy eating.'

R Capital has the money to invest in Little Chef, says Pegler, who plans a programme of refurbishment and modernisation of the estate over time. The company, which was making between £10m and £20m from revenue of £100m a few years ago, is back in profit, he adds.

But Rita Clifton, managing director at Interbrand, the brands consultancy, sees Pegler's assignment as a tough one. 'Consumer trends these days are so different from what they were,' she says. 'People eat on the move: motorists often want to get where they are going as soon as possible and that means going via the motorway, not the A roads. And there are so many choices for the consumer.'

Clifton says Little Chef should think outside the box and consider whether people would rather have a take-out alternative to sitting and eating at a table, which takes time they may not have. 'It is impossible to overstate the competitive environment,' she adds.

Doughty suggests making outlets attractive to business people and installing free internet access and links for laptops. 'Holiday Inns do it - many have become popular meeting points for executives. All they buy is a few cups of coffee, but it adds up.'

Cutting prices in the restaurants is an option, but probably too risky as margins would suffer and Little Chef's private equity owners might not be amused. Besides, Doughty says that when the previous owners, Wosskow and Heath, reduced prices, 'it was a miscalculation as people were irritated because they suspected that they had been ripped off before'.

Pegler, though, is leaving no stone unturned and has commissioned celebrity chef Heston Blumenthal, owner of the triple-Michelin-starred Fat Duck restaurant in Bray, Berkshire, to come up with some ideas about how to bolster Little Chef's sales and profitability. No, they are not likely to include Blumenthal's signature dishes, which include bacon-and-egg ice cream and snail porridge. 'But perhaps it means doing what they do more effectively and efficiently, and with more style,' says Clifton.